REINVENTING THE PERSONAL FINANCIAL WHEEL

SESSION - 3         

 

                                                 PRACTICAL ISSUES

 

 

 

IF WE AIM AT NOTHING, WE ARE SURE TO HIT IT.

 

Matthew 24:45

 

God requires us to be faithful stewards of the resource he has entrusted to us. To be faithful we must control our finances: they must not control us.

 

Here are some of the basic steps in developing and maintaining this control over our financial affairs 

 

It is foolishness, not faith, which refuses to do the practical common sense things that we should in order to go towards a desired goal.

 

If you have a spouse, involve him/her in this activity, for indeed you are one family and the goals will affect and benefit the family.

 

1.        Develop a statement of Assets and Liabilities:

Make a realistic assessment of where you are. The easiest way to do this is to make a list of all your assets and liabilities (what you own and what you owe). As much as is possible, record your assets at their realistic current disposable values, not what you paid for them.
Record all on your debts – (loans, mortgages, credit card balances, etc) - current principal balances owed plus any significant accrued interest, in those instances where the interest cost is added into the amount loaned and must be repaid even if loan is paid before the due date.
The difference between what you own and what you owe is called your ‘net worth’.

 

2.        Develop a budget

       List all (net) income from all sources (salary, investment income, allowances, etc), matching your income against your expenses. If you are responsible for remitting you own tax payments and benefit deductions, remember to include them in your expenses). This budget can be developed in relation to your periods of income; i.e. if you get paid on a weekly, biweekly or monthly basis, it may be easier to develop a budget for each week or bi weekly or monthly. Make sure that the budget is realistic, Include a savings plan between 5-10% of your income as part of you regular expenditures, and this should be viewed as one of your required expenses. Also include some charitable giving as part of your budget. The amount is for your determination based on what you feel you can cheerfully give.
Your expenses must not exceed your (net) income. If your expenses exceed your income, that means that each passing month you are getting further into debt. We will consider debt strategies later on

 

3.        Develop a simple financial Plan.

Decide where do we want to go and by when. This is not meant to be a mere faith exercise. Such a plan must be realistic and attainable based on doing the practical actions that we will adhere to in order to achieve the plan. Such planning DOES NOT preclude any miraculous events such as an inheritance. The Bible shows that it is prudent to consider our financial state and plan accordingly – Jesus speaks of a man planning to build a tower in Luke 14:28 - this means that he must know his financial affairs and plan accordingly. Also In Proverbs 23:27, Solomon the wise man admonishes us to be alert to our financial state.

 

If you have the means or the opportunity to have someone review and assess your plan, it is a good idea to avail yourself of that opportunity. There are seemingly today, an unlimited number of places and persons through whom financial advice can be obtained at a varying cost including free (through most financial institutions). Always be involved in your plan, do not leave the responsibility to a non-committed party. After all it is your plan, remain involved and weigh any advice

Be practical. Determine what items are not negotiable. Recognize the need for periodic refinement as you begin to deal with the process for the first time.

 

4.        Develop accompanying action plan.

Once you have a plan, then the next step is to develop and pursue actions that will move you towards the accomplishment of the goals that you have set for yourself. These plans should be also doable, adjustable if required and measurable, and subject to course correction if at any future point you identify a need to amend them.
Be committed to you actions, at the same realize that only God makes everything perfect the first time, but very few things we do are perfect the first time .So be patient with yourself, but not to the extent that you do not follow through with your plan.

 

5.        Institute periodic checks

Review you goals and your progress at regular intervals. Most businesses review their progress on a monthly basis, some even more frequently. Review and assess your progress at regular intervals. Identify items that are not working so you can alter them and implement corrective action as soon as possible.  Also identify actions that are working well to determine if additional improvement or efficiency can be achieved.

 

6.        Adjust your course or action once a weakness is identified. At least every 1-2 years completely review all aspects of your plan and amend adjust your goals as required.

 

Doing small things right over a long period of time produces results that most people only dream of

 

 

 

In our next month’s installment we shall address, strategies for getting out of debt.

 

 

 

 

 

Sample FINANCIAL FITNESS CHECK-UP.

 

                                                                                                                                                                yes/no

Have you reviewed your financial goals within the past 18/24months......................................

Will your current financial plans help you achieve those goals................................................

Are you satisfied with the amount of money you are saving regularly......................................

Have you determined if you have sufficient (or too much ) insurance coverage at this time............

Do you contribute your maximum to RRSPs each year..............................................................

Do you make that maximum contribution within the first 3 months of that year........................

Are you satisfied with the performance of your investments both outside & inside your RRSP...

Do you have short-term and long-term investment strategies......................................................

Do you have emergency funds available to you......................................................................

Do you use your available tax deductions...................................................................................

Have you done all you can to shelter your income from taxes.....................................................

Are you able to fund annual tax liability if not paid through salary deductions.............................

Are you aware of all the benefits available through your company..............................................

Are you aware of all the benefits available through your company pension plan.........................

Do you maintain a retirement fund outside your company pension.............................................

Have you determined what your retirement income will be.........................................................

Have you reviewed /renewed the following documents within the past 18/24 months:

·          Statement of personal net worth,

·          Income and disability insurance policies,

·          Your will.

Do you feel that you are in control of your finances and financial future.......................................

 

 

 PRACTICAL ISSUES, continued

 

SAMPLE BUDGET

 

 

INCOME

 

Salary                                                                                      $             

 

Allowance

 

Investment income

 

Sundry income                                                                                                                        ___________

 

TOTAL INCOME                                                                                                 $

 

 

 

EXPENSES

 

Charitable/church gifts                                                            $

 

Savings /Investments

 

Rent/Mortgage Payment

 

Food etc.

 

Sundry Loans

 

Insurance premiums

 

Car Maintenance

 

Travel (work)

 

Auto insurance

 

Entertainment

 

Special projects

 

Sundry                                                                                                                                    _____________

 

TOTAL EXPENSES                                                                                                              $                             

                                                                                                                                                ============

                                                                                                                                               

PRACTICAL ISSUES,  continued

 

 

                                STATEMENT OF ASSETS AND LIABILITIES               

                                                (Balance Sheet)

 

 

ASSETS

 

Cash                                                                                                        $

 

Bank Deposits (GICs, Term deposits etc.)

 

Savings Bonds                                        

 

RRSPs

 

Cash Value of Insurance Policies

 

Sundry liquid assets (Tax refunds etc.)

 

TOTAL LIQUID ASSETS                                                                                    $___________

                               

OTHER ASSETS

 

Real Estate                                                                                                              $

 

Automobiles (current resale value)

 

Other assets                                                                                                           

                                                                                                                                _____________

TOTAL ASSETS                                                                                                   $

                                                                                                                                ============

 

LIABILITIES

 

Personal bank Loans                                                                                               $

 

Charge Cards

 

Car Loans

 

Student Loans

 

Credit lines & Overdrafts

 

Sundry private loans

 

TOTAL CONSUMER LOANS                                                                            $

 

Mortgages

                                                                                                                                ______________

TOTAL LIABILITIES                                                                                                           $

                               

NET WORTH (total assets less total liabilities)                                                                    $

                                                                                                                                                =============